Financial crisis hurts outlook for EU energy goals

The folly of governmental targets for energy use is coming into clear focus in Europe.

A global financial crisis is playing havoc with the European Union's decree that 20% of its members' energy must come from renewable sources by 2020.

When governments set targets like that, they take little account of the practicalities of achievement, including real-world constraints such as engineering and economics. The EU could have set the target at 15% or 25%.

What's important in policy-making is that there be a target, without which policy-makers can be criticized for lack of seriousness.

In this case, it's easy to see how the EU came to its 20% target for renewables. Twenty percent in twenty-twenty. Isn't that clever?

Propaganda trumps practicality, not to mention the economic interests of European energy consumers.

"Lack of liquidity means companies will find it nearly impossible to raise the €500 billion which we believe would be required to make such projects successful," says a report by Helmut Edelmann, a director in Ernst & Young's Power & Utilities Center.

While utilities remain focused on the big projects that have become financially doubtful, opportunities exist in small, decentralized power production from wind, solar, photovoltaics, and biomass, Edelmann told a conference in Brussels on Nov. 25.

"Instead of just distributing power from the plant to the customer, grids will need to be adapted to receive power from customers and store or redistribute that power to others depending on demand," he said, stressing the need for cutting technology costs and "industrializing the whole supply chain."

Edelmann said, "Utilities should offer investment support to commercial customers or private consumers to help them build small renewable energy plants that feed in power back to the grid."

From here, that sounds like commercializing renewable energy on a scale sufficient to meet the EU's poetic target depends on patently noncommercial behavior by utilities. That's a flimsy foundation for a new industry—flimsy but essential.

"Without such structural changes," Edelmann says, "the ambitious EU targets will never be met."